Yahoo [not?] closing down Delicious; but why won't Carol use the F-word?

Analysing the memo from Carol Bartz, it's hard to see where she thinks future growth from Yahoo is coming from – especially as she's shutting so many services right now. But what about the one she doesn't mention? (updated)

In which we dissect Carol Bartz's memo to the Yahoo troops, after many were given "pink slips" – the American equivalent of the P45 – on Thursday. Because the question is still: what is Yahoofor?

Yahoos,

Wait – "Yahoos"? How long have you been there again? Since January 2009? If you were Jerry Yang and you'd come up with the name, that would be one thing. But you're a long way down the line from those days. How about "Colleagues" or "Beleaguered coworkers" or even "Hey"?

I want to share some tough news with you. Today, we began notifying some Yahoos that they will lose their jobs. Most of the reductions will come from the Products org and, when completed, will affect about 4% of the company.

That's 4% of headcount, we have to assume. Not 4% of revenue. Or profits, presumably.

I know this has been rumored for some time. It's disappointing when things like this leak, and it certainly doesn't make it any easier for anyone involved. This was a tough call, but a necessary one. We need to make these changes now to ensure that Products is structured and running the way we want as 2011 begins. And that means we need fewer Yahoos in some areas, and different types of Yahoos in others.

It's not surprising though when layoffs are rumoured at Yahoo. There's only one direction that its headcount has been heading for years now, and it isn't up. All that promise in "Products" has just never been brought to fruition, yet it's not for want of the people in it wanting to make it happen.

Delicious? Bought it from Joshua Schachter. Retained Joshua Schachter. At the Guardian, we could see that it was the future of search – social search. We pointed it out in December 2005. And what have you done with Delicious? You've turned it into a mess of pottage, let its engineers create a less-good interface and now you're shutting the damn thing down? To what end? How does that improve Yahoo's offering?

There are several reasons for this. First, we've found a lot of duplication in work between Products and the regions.

We'd love to know where Delicious.com is duplicated within Yahoo. Yes, there are rivals (Pinboard's team will be rejoicing and high-fiving; and we may soon be migrating our Delicious account there) but inside Yahoo itself? Nope.

Second, it's no secret that we're cutting investment in underperforming and non-core products so we can focus on our strengths (like email, the homepage, search, mobile, advertising, content and more). And lastly, we need to get the Products cost-structure in order so it aligns with our development plans for next year and beyond.

Waitaminute. Yahoo email is a strength … well, perhaps, but only because lots of people who joined it years ago got Yahoo addresses. These days they're just as likely to go for Google, because you get those crazy shareable documents and spreadsheets, or Microsoft's Live service, which offers the same combination of email and shareable documents. Plus Google and Microsoft make phone software that will integrate easily with either of those services. Yahoo presents a bit of a problem (though they'll manage it.)

So if you were starting without an email, would you get a Yahoo one? Probably not. That means that email and its home page are not the core brand strengths that will let Yahoo grow.

As for the other stuff – search (a strength?), mobile (mobile what? Oh, you mean your mobile offering), advertising (which actually is a core strength for Yahoo), content (um, Yahoo isn't a household name anywhere I go for its content, except for one product alone) – none of those is a strength.

You've heard me say before that I didn't come to cut Yahoo! to greatness. That's still true. This decision is about more than cost savings. The changes are meant to get us into a position so we can invest more in the kind of products and technology we know we need to be successful. The process that begins today – along with Blake's past org changes and new Products operational plan – helps to get us there.

We haven't been given any clues about the new Products operational plan, because what do we punters need to know about it? But leaks from within the company say that marked for "sunset" – ie, closure – are Delicious, Altavista, MyBlogLog, Yahoo! Bookmarks, and Yahoo! Picks. To be merged: Upcoming, FoxyTunes, Sideline, FireEagle, Yahoo Events and Yahoo People Search. And Yahoo Deals and Yahoo Calendar will be made into "features".

It's never easy to say goodbye to Yahoos we know and work with, especially before the holidays. Please know that we're helping those affected with severance pay and benefits, plus services to help them find other jobs.

Then again, some of them aren't weeping. The severance pay is reported to be good. But the news of so many closures suggests that while Bartz isn't, as she says, trying to "cut to greatness", she's certainly cutting. Yes, Yahoo has become a rats' nest of products that have been acquired or created, and then stuck together like a bunch of students. Who's to blame? Why, the previous managements, of course – including Terry Semel, who believed that Yahoo should be a "content" company and simply turned it into an advertising billboard. Because make no mistake, that's what it keeping Yahoo afloat right now: all those legacy users who came onto the net in the 1990s coming to check their email, who see the front page, and get shown billboard-style adverts.

It's a model that is strictly limited, because Yahoo isn't able to get more people to use its email or come to its home page, and that's what Yahoo's revenues show: they peaked at the end of 2008, at around $1.8bn (£1.15bn) per quarter, and since then have been around $1.6bn. Profits have gone up – but we can see that that is the result of continual cost-cutting by Bartz.

One last thing before I go: It's important to put this in perspective, and remember that we're making good progress on our turnaround. Margins have expanded. Revenue growth has stabilized after a long period of decelerating trends. Product rollouts are accelerating as we modernize our infrastructure. Our Search alliance with Microsoft continues on schedule, and more.

Well, whoopee for the search alliance with Microsoft – which brings Yahoo some money, but gives Microsoft all the information about who's searching for what.

We've got a lot of potential, but there is still a lot of work to be done. Let's stay focused and not lose sight of that.

Carol

See, she goes through the entire memo without mentioning the one thing that Yahoo has that everyone adores, yet doesn't realise – mostly – is a Yahoo property: Flickr. And you know what else? It's a content property – even if it's content that Yahoo hasn't generated in its own right.

OK, it has been overtaken as the biggest photo-sharing site by Facebook (and was probably always smaller than Photobucket). But it is a stellar example of how to do the internet right. When Yahoo bought Flickr in March 2005, lots of people worried that it would screw it up. It didn't. People worried that it would turn it into a pay-to-play-fest. It didn't – in fact, it relaxed some of the fees. But it hasn't really done anything with Flickr. It's just let it sit there, not adding value to the entire Yahoo catalogue. That's pretty much what you see with Yahoo's acquisitions: it's hard to see quite how it has built them into the offering.

Dan Catt, a deveoper who worked at Flickr early on (he's now at the Guardian), was really quite angry: "Del.icio.us + Upcoming + Flickr was an incredible (and smart) set to acquire together just at the right time," he tweeted, "and utterly squandered."

Thomas Hawk, the professional photographer, lays into Bartz in an open letter, calling the above a "demoralizing letter" (her stuff, not mine).

He notes:

On the day that you were announced as the new incoming CEO of Yahoo, January 14, 2009, Yahoo's stock price closed at $12.41 per share. Now on the one hand that price vs. today's price of $16.46 looks pretty good. In fact that's over a 32% return since you've been at the helm. But the thing is that you took charge coming off the worst year in the stock market in recent history so we can't really credit all of that to you.

In fact while Yahoo has been up +32% since you took over. Your competitors have been up quite a bit more. Google is up almost +100% in the same time period. Apple is up +275%, even the old slowpoke Microsoft is up +51%. The Nasdaq Composite is up +79% and the S&P 500 is up +53%. In short, Yahoo's stock performance under your tenure thus far has been a laggard – but you already know this.

He sees the absence of Flickr in that letter as a negative – though I'm not sure I do; there haven't been any reports, for example, of job losses from the Flickr team. (Though if there are, do tell us.) He says to Bartz:

"Do you even realize what you have with Flickr? It's the largest well organized library of images in the world. Not only that, it has a very strong social networking component. In fact, Flickr may represent (if managed correctly) your single biggest opportunity to launch a much larger and more lucrative social network (and stock photography agency as well). Have you spent any time in any Flickr groups? They are addicting. People live in them. They play games in them. All kinds of activity goes on in them every day. And if you took the time to really explore the social side of Flickr, you'd learn this, and figure out a way to grow it."

He points out that she doesn't even have an account on Flickr (ouch). He points out that she was the highest-paid chief executive (once you take into account stocks options and pay). Recall that Steve Jobs famously paid himself a salary of $1 when Apple was in the dumps – though of course he could afford to: he was already a billionaire (through the flotation of Pixar) and had tons of stock options. But damn, that sort of salary works well when people are having to swallow the medicine.

But here's the tough question for Hawk (which is asked in the comments on his post): how do you make money out of Flickr? Well, there's the simple one: charge people who want to use more than a certain amount of storage. Charge for more than a certain amount of upload bandwidth. Perhaps encourage people to put popular photos there by offering discounts against their upload/storage costs if photos prove popular. (Find a way to beat spammers, but, you know.) Make more of the tieup with Getty. And emphasise the social, because the last thing that Yahoo has going for it now is its users.

Hawk offers his own – become the world's stock photo agency (a $2bn market dominated by Getty and Corbis); sell commercial accounts; allow self-publishing in the manner of Blurb etc; open physical galleries (strikes me as a great idea); automate the community management.

The trouble with all this? It's on the internet, so Carol Bartz isn't going to see it. If only there were some way to make it physical so she could read it …

Update: on the delicious blog, the "team" says that "No, we are not shutting down Delicious. While we have determined that there is not a strategic fit at Yahoo!, we believe there is a ideal home for Delicious outside of the company where it can be resourced to the level where it can be competitive."

And we all know how much you can command on the market for a bookmarking site. They're so damn hard to build. Plus: "In a Thursday e-mail to The Associated Press, Delicious founder Joshua Schachter said he regrets selling his creation to Yahoo [in 2005]."